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With the macroeconomic headwinds at play, the global initial public offering (IPO) market has been a tad gloomy recently. However, the Asia Pacific markets have been an exception in the first half of 2023. A report by EY states that the region has dominated the IPO market during the period, although proceeds are down considerably compared with last year. In the period between January to June 2023, the region recorded 371 new listings with a combined value of $39.4 bn, which is 65% of the global aggregate. Another report by Deloitte specifically highlights the number of IPOs in Southeast Asia as 85 IPOs in the first half of 2023, with proceeds of about $3.3 bn.
Another report by Deloitte states that Southeast Asia saw a 16% increase in the number of new IPOs and a 5% increase in IPO amount raised in H1 2023 compared to the same period last year. Three major IPOs in Indonesia raised over $500 mn during the period, compared to only one mega IPO of PT GoTo Gojek Tokopedia Tbk in 2022 which had raised $1 bn in 2022 H1.
The top three IPOs were Nexchip Semiconductor for $1.9 bn, Semiconductor Manufacturing Electronics Shaoxing Corporation (SMEC) for $1.8 bn, and Shaanxi Energy Investment for $1 bn. The first two companies were listed in Shanghai while Shaanxi was listed on the Shenzhen stock exchange.
Reasons behind the rise of IPO in Southeast Asia
Over the past few years, factors like the pandemic, the Russia-Ukraine conflict, geopolitical instability, rising inflation, and interest have constantly impacted Southeast Asia. But things have started looking better now. The post-pandemic reopening, restoration of tourism, and booming domestic demand have led to the influx of foreign direct investment in the region.
According to Reuters, Southeast Asia is emerging as an IPO hotspot, with the region’s elevated economic growth and stable interest rate outlook making it a standout as bigger financial centres struggle to attract major new share sales.
Here is a look at individual markets that have attracted increased IPOs
China: As per the EY report, Mainland China delivered half of the 10 largest IPOs during the year’s first half, including Nexchip Semiconductor’s $1.9 bn listing on Shanghai’s STAR Market. However, several IPO candidates in China stayed on the sidelines as the country’s post-pandemic recovery stuttered and US-China tensions remained high. EY further states, even amid a challenging macroeconomic environment and lacklustre stock market performance, A-share IPOs are likely to maintain a healthy momentum throughout 2023 due to governmental support and a robust pipeline.
Hong Kong: Hong Kong’s IPO market was subdued as it clocked in just 29 IPOs and $2.3bn in proceeds in the first half of 2023 primarily due to a hike in interest rate and weak equity prices of IPOs completed in the last few years. Also, lower issuance prices combined with an increase in negative first-day returns in the second quarter led to reduced subscription rates. However, EY expects Hong Kong’s IPO market to rebound in the latter half of 2023 and surpass the previous year’s record. In March 2023, the Hong Stock Exchange also introduced Chapter 18C to encourage IPOs of specialist technology and other innovative companies.
Indonesia: Indonesia was the star performer of the region as it hosted 45 IPOs in the first half of the year and clocked in total proceeds of $2.2 bn. The top IPOs in Indonesia include that of a nickel miner raising nearly $683 mn, an integrated electronic vehicle (“EV”) battery materials company raising nearly $627 mn, and a geothermal power plant operator raising nearly $594 mn. Indonesia boasts of a large population and strong economic growth underpinned by its rich mineral deposits and strategic privatisation of state-owned enterprises. Consequently, large materials and energy sector companies are flocking to the Indonesian public markets. Indonesian President Joko Widodo’s economic policies are aimed to make the country to be a robust global EV supply chain hub and monetising state-owned commodity assets.
Japan: Japan saw 42 listings with proceeds worth $1.9 bn in the first half of 2023. This shows that the nation may be on the verge of a major economic revival. A constant low-interest rate environment, and the depreciation of the Japanese Yen, are promoting exporting. Also, it has lowered the investment cost of international investors. In the first half of the year, the Japanese market welcomed two large financial services IPOs and nearly 20 tech IPOs. Tokyo Stock Exchange (TSE) is promoting reforms, including easing the IPO process and improving the environment for direct listings to open startup IPO options.
South Korea: In the first half of the 2023, South Korea’s IPO market saw 26 deals and raised nearly $0.7 bn. This saw a decline of 10% by number of deals and a massive 94% decline in the deal value over the past year.
What’s next for the Asian IPO market?
Considering the future, Deloitte says that Indonesia is a hot IPO market, and it will have a constructive impact on the rest of the region. The Indonesian IPO market will remain popular for the current term, but potential changes in the Indonesian political regime and government policies could impact it. At the same time, during the first half, several companies from Singapore and Malaysia listed themselves through an IPO on NASDAQ. “We expect this trend for Southeast Asia companies heading for U.S. IPOs to continue,” says Deloitte.
